The following text is to inform you of the recent decision reached by the European Court of Justice ("ECJ") on a Latvian case that was referred to it. In summary, the ECJ has held that Latvian national legislation which imposes a three year limit for refunds of value added tax ("VAT") to taxpayers is not contrary to the principles of equivalence and effectiveness and is therefore compliant with EU law.
The ECJ held that Member States are entitled to impose time limitation conditions on the refund of VAT to achieve legal certainty, provided that the time limit respected the principles of equivalence (which the Latvian conditions did because the time limit was applicable to domestic and EU-based actions) and effectiveness (the ECJ had previously ruled that a two-year time limit did not offend the principle of effectiveness, and therefore a three-year time limit was also permissible).
I bring this to your attention to point out that input tax refunds in Latvia and elsewhere in the EU may not be available to you indefinitely. If you have put off the recovery of tax incurred in a Member State where you are not registered because the recovery system was inefficient and not worth your time you should take a second look at the opportunity to recover now under the new 2010 rules.
Here are a few updates on affiliate nexus legislation issues that the Tax Research department has been tracking here at Sabrix:California: SBX8 passed the Senate and was referred to the Assembly this week. It is due for final vote in the Assembly, which is scheduled for Monday March 1st.
Colorado: Governor Ritter signed HB 1193 on February 23rd as was expected. The Internet sales tax will take effect on March 1, 2010. Final Version of HB1193.
Georgia: Georgia has introduced HB1244 which would amend the definition of "business" as follows: "(1) 'Business' means any activity engaged in by any person or caused to be engaged in by any person with the object of direct or indirect gain, benefit, or advantage."
Illinois: SB 3353 was assigned to the Revenue Committee on 02/24/10. A hearing is scheduled for Thursday March 4th.
Maryland: SB824: the first reading was on 2/10/2010. SB824 has been referred to Budget and Taxation. If passed it will become effective June 1, 2010.
Mississippi: SB 2927 died in committee.
Nevada: No legislation has been introduced as of yet. However, the Governor has ordered legislators to meet and instructed them to examine the nexus issues and to introduce Nevada Internet Sales Tax legislation.
New Mexico: HB50 has been tabled.
Oklahoma: Oklahoma's Governor included an Internet sales tax in his budget released last month. As of March 1st no legislation has been introduced.
Vermont: H661 is currently assigned to the Ways and Means committee.
Virginia: SB 660 was tabled by the Senate Finance Committee on February 24th.
February was a shorter month allowing March to creep upon us a little faster. There is not a lot going on in March in terms of sales and use tax rate changes. As usual Alabama takes the lead but if you’re in Dutchess County, New York you’ll be sure to be paying the local sales and use tax on your clothing no matter how much it costs because the exemption for clothing in Dutchess County for items costing less than $110 is going away.
The following cities had rate changes in Alabama:
AutaugavilleNapier Field
Troy
Eating out will also be more expensive if you are in Lee County, SC or Broadway, VA as these two local jurisdictions impose a new sales tax on meals eaten at a restaurant or similar establishment.
You can, however, save a little money on your purchases in Kodiak, AK and Vermont on March 6 during their sales tax holiday. Kodiak, AK is having a 1 day sales tax holiday for purchases of tangible personal property. Vermont is having a 1 day sales tax holiday for non-business purchases of tangible personal property costing $2000 or less per item.
Looking ahead, next month will bring quite a bit more changes as many states and jurisdictions are already announcing changes that will become effective April 1.
According to the Spanish Tax Authorities, the Value Added Tax ("VAT") package will not be implemented in Spain's VAT law in time for the January 01, 2010 deadline. It is hoped that a lower level Resolution from the Spanish General Tax Directorate, will be adequate to support the new EU VAT related changes, instead. This brings about uncertainty in respect of Spain's treatment of VAT rules, such as the reverse charge, use and enjoyment, etc. and makes it necessary for you to rely on the VAT Directive under those circumstances.
I would like to know the effect if any of the above development on your sales tax transaction compliance in Spain and in regards to your ERP's tax determination, reporting, etc. I encourage you to share your experience in my blog.
The Virginia Senate passed S.B. 660, a so-called "Amazon" or affiliate nexus bill, on February 16th. The bill provides the following:
"A dealer is presumed to be soliciting or transacting business by an independent contractor, agent, or other representative if the dealer enters into an agreement with a resident of the Commonwealth under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet site or otherwise, to the dealer if the cumulative gross receipts from sales by the dealer to purchasers in the Commonwealth who are referred to the dealer by all residents with this type of agreement with the dealer are in excess of $10,000 during the preceding four quarterly periods. This presumption may be rebutted by proof that the resident with whom the dealer has an agreement did not engage in any solicitation in the Commonwealth on behalf of the dealer that would satisfy the nexus requirement of the United States Constitution during the four quarterly periods in question."
A second bill, S.B. 705, which also contained an "Amazon" provision as well as a plan to extend the sales and use tax to digital downloads and computer services, was defeated in the Senate Finance Committee.
S.B. 660, passed by the Virginia Senate on February 16, 2010
Update 3/1/2010: S.B. 660 was tabled by the Virginia House of Delegates Committee on Finance on February 24, 2010.
"A dealer is presumed to be soliciting or transacting business by an independent contractor, agent, or other representative if the dealer enters into an agreement with a resident of the Commonwealth under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet site or otherwise, to the dealer if the cumulative gross receipts from sales by the dealer to purchasers in the Commonwealth who are referred to the dealer by all residents with this type of agreement with the dealer are in excess of $10,000 during the preceding four quarterly periods. This presumption may be rebutted by proof that the resident with whom the dealer has an agreement did not engage in any solicitation in the Commonwealth on behalf of the dealer that would satisfy the nexus requirement of the United States Constitution during the four quarterly periods in question."
A second bill, S.B. 705, which also contained an "Amazon" provision as well as a plan to extend the sales and use tax to digital downloads and computer services, was defeated in the Senate Finance Committee.
S.B. 660, passed by the Virginia Senate on February 16, 2010
Update 3/1/2010: S.B. 660 was tabled by the Virginia House of Delegates Committee on Finance on February 24, 2010.
Below are highlights of scenarios that show how the application of the general transitional rules depend on the type of transactions involved:
The Sale of Tangible Personal Property ("TPP")
Generally, HST will apply to the sale of TPP where the TPP is delivered and ownership is transferred to the purchaser on or after July 01, 2010. HST will also apply to payments that become due or are prepaid on or after May 01, 2010 where the TPP is delivered and ownership is transferred on or after July 01, 2010. However, HST will not apply to payments made before July 01, 2010 for subscriptions to newspapers, magazines or other periodical publications.
The Provision of Services
Generally, HST will apply to provision of services on or after July 01, 2010, however, where all or substantially all ie., 90% or more of the service is provided before July 01, 2010, then HST will not apply. HST will apply to payments that become due or are prepaid on or after May 01, 2010 for services to be provided on or after July 01, 2010.
The Provision of Licenses and Leases
Generally, HST will apply to the provision of leases and licenses for that portion of a lease interval that begins after July 01, 2010. The HST will not apply to a lease payment that pertains to a lease interval that will begin before July 2010 and will end before July 31, 2010. HST will however apply to payments that become due or are prepaid on or after May 01, 2010 for the provision of a lease or license to the extent that they are for a lease interval that will occur on or after July 01, 2010 unless the lease interval ends before July 31, 2010.
The Sale of Intangible Property
Generally, HST will apply to the sale of intangible property supplied by way of sale where payment becomes due or is prepaid on or after July 01, 2010.
The Sale of Real Property
The HST will generally apply to the sale of real Property ("RP") other than used residential housing if both ownership and possession of the RP is transferred to the purchaser on or after on or after July 01, 2010.
The above highlights are for your general information and should not be used as substitute for the law. Should you need assistance with the rules you should contact your adviser. However, I am interested in discovering if there is a particular element in the transitional rules that concern you.
San Ramon, Calif., Feb. 16, 2010 – The Tax & Accounting business of Thomson Reuters announced today availability of two new online services – Taxcast International and Ask the Expert Webinar – to help businesses stay abreast of the latest sales and use tax and value added tax (VAT) changes. Read the full article.
Here is an update to my previous post regarding the affiliate nexus bill in New Mexico:
http://blog.sabrix.com/blog/transaction-tax-talk/0/0/new-mexico-considering-an-amazon-tax
http://blog.sabrix.com/blog/transaction-tax-talk/0/0/new-mexico-considering-an-amazon-tax
Update: HB50 has been tabled for now. This does not necessarily mean that we have heard the last of it, however. It is possible that HB50 could be resurrected or incorporated into another bill. We will continue to monitor its status.
I am leaving for a much anticipated vacation in warm and sunny Phoenix in a week, so this really caught my eye. The Phoenix, Arizona City Council has just approved an ordinance that will impose the privilege (sales) tax on the sale of food for home consumption (When on vacation I like to save a little money by not eating out every meal). Effective April 1, 2010 purchases and sales of food will be taxed at the current retail and use tax rate of 2%. Fortunately for me the tax doesn't go into effect until after this trip, but I'm sure I'll be paying it on a future vacation since Phoenix is one of my favorite escapes from the rain here in Oregon.The food tax will be reported under a new and separate business code on tax returns.
Monthly filers will receive a tax return form in April 2010 to report April 2010 retail food sales activity, and the return is due May 20, 2010.
Quarterly filers will receive a tax return form in June 2010 to report April, May, and June 2010 retail food sales activity, and the return is due July 20, 2010.
Annual filers will receive a tax return form in December 2010 to report January through December 2010 retail food sales activity, and the return is due January 20, 2011. For annual filers, only retail food sales made prior to April 1, 2010, can be excluded from reported gross income.
Release, City of Phoenix Finance Department, Tax Division, February 2010
Here is an update to my previous post regarding the affiliate nexus bill in Virginia:
http://blog.sabrix.com/blog/transaction-tax-talk/0/0/yes-virginia-there-is-an-amazon-tax-bill
Update 2/10/2010: S.B. 660 was approved by the Senate Finance Committee 14-1 today. It now moves to the full Senate for vote.
Update 3/1/2010: S.B. 660 was tabled by the Virginia House of Delegates Committee on Finance on February 24, 2010.
Here is an update to my post from January 28, 2010:
http://blog.sabrix.com/blog/transaction-tax-talk/0/0/colorado-latest-to-introduce-an-amazon-tax-bill
Update 2/11/2010: HB-1193 is back in the House after being approved by the Senate. Because the bill was modified in the Senate the House must vote on it again. If the changes are approved the bill will go to the Governor who is expected to sign it.
The bill as amended by the Senate is available here: HB-1193
Update 2/16/2010: As expected, the House approved the Senate amendments and with a vote of 34-31 re-passed the bill. The bill now goes to the Governor for approval.
Update 3/1/2010: The Colorado Internet sales tax will take effect on March 1, 2010. As expected, Governor Bill Ritter signed HB1193 on February 23rd. The final version of the bill is available HERE.
http://blog.sabrix.com/blog/transaction-tax-talk/0/0/colorado-latest-to-introduce-an-amazon-tax-bill
Update 2/11/2010: HB-1193 is back in the House after being approved by the Senate. Because the bill was modified in the Senate the House must vote on it again. If the changes are approved the bill will go to the Governor who is expected to sign it.
The bill as amended by the Senate is available here: HB-1193
Update 2/16/2010: As expected, the House approved the Senate amendments and with a vote of 34-31 re-passed the bill. The bill now goes to the Governor for approval.
Update 3/1/2010: The Colorado Internet sales tax will take effect on March 1, 2010. As expected, Governor Bill Ritter signed HB1193 on February 23rd. The final version of the bill is available HERE.
After the EU VAT changes as of January 01, 2010 this year it is Canada's turn for major change in its sales tax system. The Value Added Tax ("VAT") known as the Goods and Services Tax ("GST") is migrating on July 01, 2010 to two of the most significant Canadian Provinces in terms of trade Ontario and British Columbia as they are parting with their provincial sales taxes ("PST"). The new tax which is an extension of the GST will be called the harmonized sales tax ("HST") and will incorporate the federal GST rate and the provincial sales tax component. As a result Ontario will merge its 8% PST with the federal 5% GST for a combined 13% HST. British Columbia will merge its 7% PST with the 5% federal GST for a combined 12% HST. For your information we will be including Ontario HST rules as part of our March 2010 Content release so you will be able to test your company transactions. British Columbia has not passed the legislation yet so we are unable to do the same at this time.
Both provinces have approved transitional rules that will be incorporated in the HST legislation to provide consumers and businesses with guidance to determine where the existing PST or the new HST will apply to transactions that straddle July 01, 2010.
Are You Ready for These Important Dates?
October 14, 2009 - Generally, signifying that certain businesses and public sector bodies engaged in GST exempt business activities may be required to self-asses the provincial component of the HST on payments that become due or are prepaid after this date and before May 01, 2010 for property and services to be provided on or after July 01, 2010.
May 01, 2010 - Generally, signifying that HST will apply to payments that become due or are prepaid on or after May 01, 2010 for property or services to be provided on or after July 01, 2010.
July 01, 2010 - HST implementation date
October 31, 2010 - Outstanding Ontario PST will become payable by this date if not invoiced.
Part two of this blog posting will highlight scenarios that show how the application of the general transitional rules depend on the type of transactions involved. Stay tuned.
Both provinces have approved transitional rules that will be incorporated in the HST legislation to provide consumers and businesses with guidance to determine where the existing PST or the new HST will apply to transactions that straddle July 01, 2010.
Are You Ready for These Important Dates?
October 14, 2009 - Generally, signifying that certain businesses and public sector bodies engaged in GST exempt business activities may be required to self-asses the provincial component of the HST on payments that become due or are prepaid after this date and before May 01, 2010 for property and services to be provided on or after July 01, 2010.
May 01, 2010 - Generally, signifying that HST will apply to payments that become due or are prepaid on or after May 01, 2010 for property or services to be provided on or after July 01, 2010.
July 01, 2010 - HST implementation date
October 31, 2010 - Outstanding Ontario PST will become payable by this date if not invoiced.
Part two of this blog posting will highlight scenarios that show how the application of the general transitional rules depend on the type of transactions involved. Stay tuned.
Last week Oklahoma Governor Brad Henry released his budget for 2011. In the budget are several compliance initiatives geared to increase revenue, including one to collect sales tax on Internet, telephone and mail order sales.The following is from the proposal:
Collection of Sales Tax on Remote Sales
"Currently, out-of-state businesses without a presence in Oklahoma are not collecting sales tax on Internet, telephone or mail order sales made to Oklahoma, effectively providing them with an advantage over Oklahoma-based operations that do collect the sales tax. This compliance initiative allows the Oklahoma Tax Commission to pursue sales tax collections from the out-of-state companies in question. The Governor’s budget includes an increase of $95 million to the General Revenue Fund in FY-2011 collection of taxes currently due the state on these sales by out-of-state entities."
Legislation to support the initiative has not yet been introduced in the legislature, but is proposed in the budget.
The complete budget is available HERE.
With all the affiliate nexus bills that have been introduced lately in legislatures across the country I thought it might be interesting to take a look at where the concept of tax nexus comes from. Nexus is a Constitutional concept. Traditionally the "dormant Commerce Clause" protects sellers with no in-state presence from being obligated to collect sales or use tax. But, what is the dormant Commerce Clause?
The Commerce Clause: The U.S. Constitution gives Congress the power "to regulate commerce with foreign nations and among the several states..."
The dormant Commerce Clause: If Congress has not exercised its power, state and local governments are free to regulate local aspects of interstate commerce such as by imposing a tax on an out-of-state vendor.
If a state chooses to act under the dormant Commerce Clause the regulation must meet two requirements:
1) it must not discriminate against out-of-state competition, and
2) it must not be unduly burdensome.
Use taxes are not considered discriminatory even though they single out interstate commerce for taxation as long as the use tax rate is not higher than the sales tax rate.
A non-discriminatory use tax must also not be unduly burdensome. Three factors are generally looked at to determine this:
1) the existence of substantial nexus,
2) fair apportionment, and
3) fair relationship.
The first prong is the one that gets all the attention. A remote seller may only be subjected to use tax collection obligation if it has substantial nexus with the taxing state.
Q: How does a remote seller with no physical presence in a state get substantial nexus?
A: Through "attribution".
"Attributional nexus" is the nexus created when the physical presence or contacts of A are attributed to B in order to determine that substantial nexus exists. The crucial factor is whether or not the activities performed by A are significantly enough related to B's ability to establish and maintain a market in the state for sales. Is an affiliate related closely enough? We shall see.
The Commerce Clause: The U.S. Constitution gives Congress the power "to regulate commerce with foreign nations and among the several states..."
The dormant Commerce Clause: If Congress has not exercised its power, state and local governments are free to regulate local aspects of interstate commerce such as by imposing a tax on an out-of-state vendor.
If a state chooses to act under the dormant Commerce Clause the regulation must meet two requirements:
1) it must not discriminate against out-of-state competition, and
2) it must not be unduly burdensome.
Use taxes are not considered discriminatory even though they single out interstate commerce for taxation as long as the use tax rate is not higher than the sales tax rate.
A non-discriminatory use tax must also not be unduly burdensome. Three factors are generally looked at to determine this:
1) the existence of substantial nexus,
2) fair apportionment, and
3) fair relationship.
The first prong is the one that gets all the attention. A remote seller may only be subjected to use tax collection obligation if it has substantial nexus with the taxing state.
Q: How does a remote seller with no physical presence in a state get substantial nexus?
A: Through "attribution".
"Attributional nexus" is the nexus created when the physical presence or contacts of A are attributed to B in order to determine that substantial nexus exists. The crucial factor is whether or not the activities performed by A are significantly enough related to B's ability to establish and maintain a market in the state for sales. Is an affiliate related closely enough? We shall see.
"While recession-induced cost-cutting has moved some companies to offload non-core functions, many hesitate to take the plunge on long-term deals.
Routine reconciliation and financial reporting: For many recently downsized staffs, this is tedious work that takes up too much of their already overworked days. Wouldn’t it be great to hand the job off to someone else?" Read the details of this Treasury & Risk article here.
Routine reconciliation and financial reporting: For many recently downsized staffs, this is tedious work that takes up too much of their already overworked days. Wouldn’t it be great to hand the job off to someone else?" Read the details of this Treasury & Risk article here.
Sorry for the delay but another month has rolled around and it's time to talk about what sales and use tax rate changes are effective. It is February and it's not a particularly popular month to change your rates unless you're in Alabama. The following cities/counties in Alabama had rate changes effective 2/1/10:
Cusseta
Dale County
Hamilton
Jackson
Warrior
Also Oakman (city) will no longer be administered by the State of Alabama and will be administered by AlaTax (RDS).
Stay tuned for updates on rate changes that are becoming effective.
San Ramon, CA, February 2, 2010 – The Tax & Accounting business of Thomson Reuters announced today availability of Sabrix Managed Tax Service (MTS) Winter 2010 version. Sabrix MTS combines an on-demand version of the same trusted tax platform that powers over $1.7 trillion in transaction taxes for companies worldwide, service from a multidisciplinary team of tax experts, and SAS 70 certified processes. The latest version includes a new remittance and filing service, and additional reporting capabilities to provide an end-to-end solution for sales and use tax compliance, while increasing visibility and control so that financial executives can feel confident outsourcing the process. You can read the full press release here.
On Friday, Colorado House Bill HB10-1193 was introduced and referred to the Appropriations Committee. HB10-1193, much like the bills introduced recently in Virginia, New Mexico and Mississippi, would create a so-called "Amazon" or affiliate tax in Colorado by expanding the activities which create sales tax nexus with the state. Similar to other recently proposed legislation HB10-1193 would create a presumption that any out-of-state retailer that has a referral relationship with an affiliate has an obligation to collect sales tax. The bill specifies that the presumption may be rebutted by the out-of-state retailer if the retailer can show that the affiliate with whom the retailer has such a relationship did not engage in active solicitation. If the bill passes, Colorado is apparently serious about their intent to enforce it. Section 2 of the bill states that, "for purposes of any efforts to collect use tax, the executive director of the department of revenue may issue a subpoena to any out-of-state retailer if the out-of-state retailer refuses to voluntarily furnish specific information when requested and may take the out-of-state retailer's testimony under oath".
The bill, if passed, will take effect on March 1 of this year.
Update 2/11/2010: HB-1193 is back in the House after being approved by the Senate. Because the bill was changed in the Senate the House must vote on it again. If the changes are approved the bill will go to the Governor who will most likely sign it.
Update 2/16/2010: The House approved the Senate amendments and repassed HB-1193 in a 34-31 vote. The bill now goes to the governor to be signed.
Update 3/1/2010: The Colorado Internet sales tax will take effect on March 1, 2010. As expected, Governor Bill Ritter signed HB1193 on February 23rd. The final version of the bill is available HERE.
Thomson Reuters to Participate in State Income Tax Monitor CPE Seminar
Strategies for Integrating Nexus Reviews into Management Plans to Be Revealed.
Carla Yrjanson, Senior Director, Sabrix Tax Services, Part of the Tax & Accounting business of Thomson Reuters.
Available for CPE credit, the Web seminar entitled, "Nexus Reviews: Uncovering State Sales or Income Tax Obligations" will provide corporate tax departments with concrete strategies for effectively integrating a sound state tax nexus review into their management plans. The panel will offer action-oriented guidance at each step of developing and executing a nexus review. Read more here.
Strategies for Integrating Nexus Reviews into Management Plans to Be Revealed.
Carla Yrjanson, Senior Director, Sabrix Tax Services, Part of the Tax & Accounting business of Thomson Reuters.
Available for CPE credit, the Web seminar entitled, "Nexus Reviews: Uncovering State Sales or Income Tax Obligations" will provide corporate tax departments with concrete strategies for effectively integrating a sound state tax nexus review into their management plans. The panel will offer action-oriented guidance at each step of developing and executing a nexus review. Read more here.
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